DomainFest Workshop: Tips and Strategies for Buying and Selling Domains

Experts: Michael Berkens, Larry Fischer, Tessa Holcomb, Jason Miner, Kathy Nielsen
Moderator: Lisa Box
From the program: “For buyers, our expert panelists will offer advice on where to buy, how to do keyword research, and what factors to consider when deciding on a fair purchase price. For sellers, the panelists will talk about pricing strategies, distribution options, and the escrow and transfer process. This is a great opportunity to ask industry pros for tips.”

How do you price domains to sell? Formulaic? Stats?
Michael: First factor is comparable sales, so it’s important to look at DNJournal.com for sales comps. Look for names that are similar, by category, similar topics, similar names. I sold VisitStockholm.com, and you can use other visits___ for them. Look at tourism, GNP in city, and compare it to the geo you have.

How do stats affect a domain name?
Larry: Looking and revenue and # visits to determine value has increased over the past year. End users want to see revenue. Others want to own a marked and have the major name for that category.

What are the best ways to price a domain via tools?
Larry: We look at Alexa for name strength. Estibot can go either way: use if helps cause, otherwise don’t use. Look at comps. If we know a company will get great value from a domain, we’ll price it higher and hold it.
Jason: We look at comparables over the past 10 years to get an idea.

Doesn’t SEDO do a study?
List: We do a study every year that we publish on our website (Sedo > Resources on website). Use a few different sources and compare them all. Afternic and Sedo both offer appraisal services.

Larry: Talk to a number of brokers. They might bring up a number of different thoughts about the value or non-value of a domain. You’ll want to know what a broker thinks s/he’ll be able to get for a domain.

How do you bring up or down sellers about domain name price?
Tessa: If the seller has data, we’ll have discussions. But we look at the data: number of advertisers for keyword, how much they’re paying, how much traffic…I walk the seller through an education process.

Michael: Should use Google to see how the term is being used in other extensions. If you have abc.com you’ll want to see what abc.net and abc.org is doing. You might be able to help them upgrade and reach all of the traffic that they’re losing to the .com by user mistakes.

Setting an actual offer, or make offer?
Lisa: We all want to sell to end users (not other domainers). They don’t want “make an offer’ — they want set prices as they’re much more likely to make that offer. Otherwise, they don’t know how much to offer. Sedo offers a fixed price which is 25% of all of their sales.
Jason: A small or medium business owner wants to see a price, and then negotiate from there. A lot of people just buy at that price.SMBs feel a trust when there’s a price. Otherwise, they may not inquire, price can be jacked up for various reasons (inquirer has a big business, etc.).

Michael: Landing pages have an offer link on our sites. $2,500 minimum on all sites to get rid of the $50 or $100 offers. Most buyers come form that. No outbound sales. All sales are inquiries.
Larry: I do a lot of calling to the industry to players that could use a particular keyword. Lots of calls to us based on the WHOIS lookup.
Jason: Once the name is priced, the biggest thing is distribution. Sedo has an MLS service, but you want to get it to multiple registrars to get exposure.
Lisa: A lot of people know Sedo and Afternic (both with MLS, multiple listing services feeding multiple registrar listings).

Tell us about sales experience. What were key factors to close deals?
Larry: We bought stocks.com. Look at industry, cost per leads, how big industry is, growth or not, other sales that occurred within industry, rate name against other sales, and a gut check — have to feel right about it.

Buying names. Where are the places to go for end users and domain investors. WIth small investment fund, what to do?
Michael: So many different ways. Some people are happy registering an $8 drop name, then going to snapnames and getting $50 for it. Then there are people like Mr. Fisher that buy high value domains and get more. As far as purchasing, Namejet or NSI or general drop.

Michael: Some registrars drop to a particular source. enom and Network Solutions drops to Namejet. Moniker drops only to Snapnames. Godaddy has their own system. Other miscellaneous registrars drop between 2-3 pm every day, and a lot are picked up by scripts and a lot by hand.
Tessa: You can work with a broker to specify your budget, types of names, etc. and have some real mentorship to find the right products.

Any specific categories to show better ROI for new investors?
Larry: Look at Google and look at what people are spending on particular keywords. If it’s a high CPC, most likely they’ll be buyers for names in that industry.

ccTLD opportunities?
Lisa: We just published market study for 2010. .de was best selling ccTLD, not surprisingly. 46% of all country code market. .eu is next best selling. Then .co.uk, then .tv.

What’s the difference between “fast transfer” and escrow?
Larry: I personally recommend escrow (like escrow.com), or using a domain lawyer. You transfer the domain name only after receipt of money by the escrow agent. Maybe when there’s a wire involved.
Jason: Fast transfer is also secure, because funds are guaranteed.

New TLDs?
Michael: Lots of opportunities to both buy/sell and become your own registry. Possible 500 new extensions coming out over the next year or two could be enormous. 21 TLDs now, to 521 TLDs within a year is anyone’s guess as to repercussions.
Larry: I don’t think it will affect .com, .net and .org values. Transactions are now increasing. We don’t know how Google will handle and rank these new TLDs. Treat them, like .insurance, better than insurance.com? It’s all a guess right now.

What will it take to get new users into the market?
Larry: Knowledge that there is a market. Keep educating these people. Stronger liquidity to the market will help.

How to increase value and find buyers?
Tessa: Seeing some domains going from CPC to CPA and some domains are converting better. Categories doing well: health and fitness, finance, dating, gaming. As far as development, if you can develop a name to get traffic that Google likes and rank to page 1, then you’ll see the highest ROI.
Jason: It’s the 80/20 rule, 20% of portfolio makes up 100% of the parking revenue. Options for ecommerce sites you can build to add value; revenue not as good as PPC, but building traffic helps. Make sure you have a link that says “domain is for sale” as Michael said.

Larry: My personal experience is brand value of domains helps more than development. 95% fo sales are more due to (for top and generics) names, not site. Two to three word domains has seen growth in finished sites.

Kathy: GreatDomains monthly auctions (all .com and .net), 50% are from outside North America. .tv and .co are both doing well. After Sunday, we’ll see how the SuperBowl ad (Go Daddy) does to drive sales.

Would you recommend .co domain names?
Michael: 600,000 .co registered, lots of names available. You want to see a diversified portfolio, just like in finances.

Predictions for future?
Jason: In negotiating sales, having the name priced is very important. Link on top of page is also important. Having an educated sales force helping you make the sale helps. Some domain owners, if a day goes by without response 25% of sale opportunity is lost. After 48 hours 25-75% of sale opportunity is lost. We try to respond to leads immediately at Afternic. Trends are positive for future as 4Q was strong. You, personally, have to find something you’re interested in personally…you then know facts and figures of market so you can talk about it more intelligently.
Lisa: 12% growth last year at Sedo. I don’t see an end to growth. Opportunities pop up everyday. You can still get in, and don’t need to be intimidated. Look to invest in what you know.
Tessa: I predict a lot more newbies coming into market, which is exciting.
Larry: Largest domain name sale in next year. $20-30 million is coming. A lot of consolidation too.
Michael: A lot of inquiries come in through WHOIS lookup. Don’t use privacy so people can call you. Have accurate WHOIS information so people can contact you. In past year to 6 months, if you quote $25,000 you can actually get a reasonable first offer and counter to my offer as opposed to years ago when people would claim that domains are not worth more than $8.

Questions from audience

What do you recommend to learn about best practices?
Michael: Lots of domain blogs and resources that didn’t exist years ago. Domaining.com. TheDomains.com. DNJournal.com. DomainNameWire. Elliot’s Blog.

What do you do when you don’t get a response when inquiring about a domain?
Lisa: Contact Sedo or Afternic. If the information is inaccurate, we can give them a call.
Tessa: A broker can do a lot of the leg work for you.
Michael: Check WHOIS history on DomainTools.com. You can look back at previous registrations, which might help.
Jason: If parked page, you can sometimes figure out who the owner is.

How to package to do a small portfolio sale?
Jason: We try to bundle names together, if possible. We work with multiple individuals who are interested in bulk purchases.

Tax laws on domains not rock solid. When appropriate to use long term or regular?
Michael: We take our sales of domains help for more than 1 year as capital gains. Proper way to account for write off is to amortize over 15 years (for premium domains, say $1,500 each…not $8 domains). And if sale, you recapture amortization and true it back up again.
Larry: We treat them like Trademarks, which are on a 15 year schedule.

Larry: There are times if someone comes to you and offers you something and you say no, they’ll come back with higher prices. One domain someone offered $5,000 by email. I would through a stupid number at him, four years later it sold for six figures. Not everyone can wait that long. If you don’t have to sell, sometimes the best thing to do is say no.
Michael: I’ve always refused to pre-price names. Market is too fluid. I sold VisitStockholm.com for $77,000. When you see sales like that, you whole pricing model will need to change. You can’t leave all the names out there pre-priced for a long time.
Jason: 20% of everyone’s portfolio is high quality. The remaining 80% should be priced. SMBs have the trust when a price is set.

How do you define quality for good names?
Jason: The ones that are making revenue. We sell 3,000 domain names per month because they are priced.
Michael: Traffic and PPC revenue are a couple of factors in determining value. In these visit domains they had a few hundred per month. But they’re premium domains. And in the tech world things change quickly, and something like camroulette.com (which sold for $150,000) came out of no-where quickly, and if you had something like that you might still have it priced for too little.
Larry: When I’m working with the client, I find out about them more than the domains. Do they need to sell, what is their situation. Can you wait for a higher offer to come in? Each person is different and that can affect the price.

For those sellers, what do you recommend to sell?
Jason: Secure how we sell domains. Sellers agree to sell with an agreement. It also protects the buyer. What we do at Afternic, we do the integrity checks, trademarks, etc. to protect the seller so when the buyer comes to us, they know the names available, it will get into their account, and that it’s a secure transaction.

Michael: Most cities use visit… cities, because more city domains are not available.

Meet Domainsherpa Live

The Domainsherpa Story

Thousands of new businesses startup every day and each needs an Internet presence. But domain names are confusing to the uninitiated. What if you had a guide, someone to show you the way and make the journey easier? That's our mission with DomainSherpa. I'm Michael Cyger, your host. It is my job to introduce you to “sherpas” who will answer all your domain questions. Read more...